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There are two ways employer pension schemes deal with tax relief. Where low earners are enrolled in a net pay arrangement they have missed out on a 20% government top-up into to their pension scheme. However, low earners where their employer scheme is one which has relief at source, they will automatically receive the government top-up into their scheme.
This is currently affecting the take home pay of some employees. Where a net pay arrangement is in force the employee has 100% of the contribution deducted from their net pay. Under a relief at source scheme, the employee pays 80% of the premium whilst HMRC pay the rest. For higher earners the result is the same regardless of the type of scheme the employee is in (although higher rate taxpayers may need to claim higher rate tax relief, depending on the type of scheme they are in).
It has recently been announced that the payments which were planned to correct this have been delayed by another year. The payments were to be made to affected individuals for the tax year 2024/25 onwards but in in 2025/26. The timetable is to be delayed with the first payments planned in 2026/27.
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